Last week, I received this email from the mother of one of our college sophomores.

“This has been a very frustrating time with the new policy on obtaining IRS transcripts for financial institutions. I have been calling for the past month to obtain this document for financial aid and as of today this document is still unavailable.

This creates such a discomfort in award distribution, not only for the institution, but the recipients. My son, [name removed], felt very uneasy, as well as we as parents, about this as he is a presidential scholarship recipient. He is working so hard at the university and finds this discouraging.

According to the IRS this document may not be available until late April early May 2012. We had to pay taxes again this year and although the check was cashed by the IRS about 4 weeks ago the document is not available until the time indicated. Please somehow assure students of their scholarships because this is discouraging.”

To be clear: tax filers who received a refund are having their returns processed first; tax filers who had to pay on their taxes had their checks cashed, but have returns that will not be processed until late April or May – a delay of twelve weeks or more.

I responded to the mother that the delay caused by the IRS Data Retrieval Process would not affect her son’s financial aid package here, but that the package would not be final until the verification process is completed; it appears likely that this will happen in May at the earliest.

We perform a quick review of every ISIR (the school side of the FAFSA results) we receive, but when I received her email I pulled her son’s record and looked it over closely. There is nothing obviously wrong with the data (the taxes paid are in a “normal” range, the wages earned are close to the Adjusted Gross Income, and so on), but the most reassurance I could give them is that everything appeared to be in order. The final aid package must wait for a completed verification.

March and April can be anxious, frustrating times for families even if everything goes smoothly. Requiring that families use the Data Retrieval Tool or IRS tax transcripts to complete verification adds to that frustration. The fact that they will not be available – due to IRS policy decisions on processing tax returns – until May takes that frustration to a whole new level.

The powers-that-be should note two items that may make this issue explode in the next four weeks:

1) In mid-April the Department of Education is going to send out a reminder to families that they should use the DRT process, i.e. to people who have already tried to use it and were told they cannot use it until May;

2) May 1 is the national deposit deadline for most colleges – some families are going to be asked to commit before their financial aid packages are final.

We have always had those families who miss deadlines, who don’t file taxes properly, who don’t respond to instructions on verification. And there have been those who have situations that require a delay due to tax filing extensions.

The difference this year is that families who do everything right – those who file their FAFSA and tax returns on time and accurately, who respond quickly to requests for information – are barred from getting their financial aid in a timely fashion solely because of federal policies.

Did you like this article? You can get all the latest articles sent to you by entering your email address in the box below and clicking "Subscribe." Your email will only be used for this subscription and you can unsubscribe at any time. You can also Follow Us on Twitter!

I’m happy to report an update to this little story. Today (April 16), the Department issued GEN-12-07, which states in part:

“In the limited set of cases where an aid applicant, who has filed a tax return and attempted unsuccessfully to use the IRS Data Retrieval Tool or to obtain IRS Tax Return transcripts, needs a timely alternative for meeting the 2012-2013 verification requirements, institutions may … use a signed copy of the … 2011 IRS Tax Return … as acceptable verification documentation for the 2012-2013 award year.”

This special allowance is in place through July 15, 2012. The notice also alerts colleges that they may still be required to secure DRT/tax transcript documentation at a later date.

Thank you to the Department of Education for recognizing the plight of some families and acting to ease the burden!

Randy, you must have heard my screaming! That is good news although July is too late to resolve what families like myself are enduring right now and are trying to figure out what to do between now and May 1st, when the decision and deposit must be made. Thankfully some schools are recognizing that there is a problem and a serious disconnect in process.